Retail inflation, on the other hand, eased marginally in January to 5.07 percent — after touching a 17-month high of 5.21 percent in December — as food price rise showed some moderation.

"Focus on #MakeInIndia, showing consistent results. Manufacturing recoded a robust growth of 8.4 percent in Dec'17 over Dec'16," Commerce Minister Suresh Prabhu said in a tweet.

The Index of Industrial Production (IIP) showed that the growth of 7.1 percent in December was mainly on account of an uptick in the manufacturing sector which constitutes 77.63 percent of the index. It grew by 8.4 percent in December last year as compared to just 0.6 percent in December 2016.

The capital goods, a barometer of investments, showed a sharp increase in output by 16.4 percent in December 2017 as against a decline of 6.2 percent a year ago.

IIP had grown at 2.4 percent in December 2016. The growth for November 2017 was revised upwards to 8.8 percent from provisional estimates of 8.4 percent released last month.

Based on the Consumer Price Index (CPI), retail inflation in January was down marginally to 5.07 percent in January 2017, compared to 3.17 percent in the year-ago month.

Inflation in the vegetable segment slowed to 26.97 percent as against 29.13 in December. Prices of fruits too rose at a lower pace of 6.24 percent last month, as against 6.63 percent recorded in the preceding month.

For the fuel and light segment, inflation was 7.73 percent last month compared to 7.90 percent in December. Commenting on the IIP data, industry body Assocham said that domestic market will be the driving force in the coming months as growing Indian economy will provide the steady flow of new businesses.

"However, risks to the Indian economy continue to prevail in the forms of continued uncertainties in the global environment due to geopolitical situations, including rising global protectionism could further delay a meaningful recovery of external demand," said Assocham president Sandeep Jajodia.

Principal Economist with ICRA Aditi Nayar opined that it remains "somewhat premature" to attribute the recent double-digit growth in capital goods to a pickup in investment activity.

On CPI data, Ind-Ra said the inflation and inflationary outlook suggest that on policy rate RBI is likely to remain in a pause mode at least during the first half of 2018.